Hello, Evelyn here again talking about meal deduction while traveling. Now, there is a difference between meal deduction when you’re eating locally and when you’re eating travel… While traveling. Some business owners think that when they stop for breakfast on their way to work, that meal is deductible. I’ve had to catch it a couple of times in my clients’ books. But that notion is wrong. Just because meal and entertainment is deductible does not mean every single meal you eat out is deductible. If you’re not engaging in the business meeting while local, then the meal is deductible only if you’re traveling for business. A stop in the McDonalds on your way to work is not a deductible meal expense.
To be considered a business travel meal, the travel is for business required, the travel is for business purpose, it’s required by the business. The travel must be for more than one day of work. So in other words, you’re spending overnight and the sleep or rest is needed so you can meet the demands of your work.
Meals eaten for non-business purposes in the ordinary course of the business day is not deductible, while eating meals eaten while traveling for business purpose is deductible. So in other words, you don’t get to go out to eat with your wife and write up as a meal expense. Now the rest of us don’t get to do it, so you don’t get to do it for business.
So special rules: When traveling, you can choose to deduct meals by using actual expenses or a per diem rate. Employees can also be reimbursed with per diem rate. So if your employees travel on your behalf, you can also reimburse them with a per diem rate. Either way, records documenting actual expenses must be kept. You must keep your records because the IRS could demand your records at any time, it’s a requirement. So the per diem rate, if you’re going for at a high cost area, is $71, and it’s $60 if it’s a low cost area, and here, I put a link to the IRS notice showing you what the high cost areas are. So if you need to search to see where you’re traveling to and what the rate is, you can look at that notice.
So, you don’t have to document your expenses if the meal expense is less than $75 or the meal… And that’s while traveling. The meal expense while traveling away from home is under an accountable plan and using the per diem rate. So in that case, you don’t really have to keep as strict a documentation. So if you like what you see in this video, you want more of this kind of video, please be sure to like my video or subscribe to my channel. Thank you for watching, I look forward to seeing you in the next video.